Integro Accounting says limited companies cannot afford to ignore a VAT case, because a finding of dishonesty was NOT needed to hit a director with a £900k penalty for breaching the Kittel principle.
Key points: Opus Labour Services and Jason Giller v HMRC
- A limited company director doesn’t need to be dishonest, or to have turned a blind eye, to face a penalty of more than £900,000 under the Kittel principle — Integro Accounting.
- HMRC didn’t just deny Opus its input tax credits — it penalised both the company and Giller personally, points out Egos’s Roger Sinclair, citing what he called the tribunal’s own “delightful” words: ‘one or two defaulting suppliers might be “bad luck,” but five is “entirely beyond the realm of misfortune.”’
- “I didn’t know” is “no longer a defence” for VAT-registered company directors, according to C2E lawyer Kareena Prescott, who spotted that Giller tried to blame his accountant, but responsibility rests with the taxpayer and here, the taxpayer failed to think about facts that were directly in front of him.
- In the wake of Giller v HMRC, company directors must question supply-chain arrangements ‘that don’t stand up to commercial scrutiny’ and take “meaningful steps” to manage risk, says Professional Passport CEO Crawford Temple.
- Directors should document their supplier due diligence, like VAT/Companies House checks, says 16-year contractor accountancy veteran Christian Hickmott, the managing director of Integro Accounting, which advises that the best HMRC defence is often not proof that no fraud existed, but proof that reasonable steps were taken.
What does ‘should have known’ mean under the Kittel principle?
Under Kittel, “should have known” does not require HMRC to prove a director was involved in fraud or deliberately turned a blind eye, says Integro Accounting, citing the case, ‘Jason Giller v HMRC.’
So a company director who commits no fraud — even turns no blind eye to fraud — is still “exposed” to HMRC, adds Integro, on the basis they “knew or should have known” (Kittel) fraud was connected.
“Kittel’s key question — or ‘test’ — is whether a reasonable business person… would’ve recognised red flags that transactions were connected with fraud and made further enquiries,” says Integro Accounting’s boss.
What did the tribunal find in Opus Labour Services and Jason Giller v HMRC?
“In Opus Labour Services and Jason Giller v HMRC,” continues Integro’s Christian Hickmott, “the Upper Tribunal found Jason Giller had neither actual knowledge of fraud nor blind-eye knowledge.
“But a string of failed payroll providers, previous HMRC warnings about labour-supply fraud, and limited due diligence, led the UT to find he should’ve appreciated the risks and investigated further.”
Egos, a law firm, observed to Integro yesterday (Aug 11 2026) that Giller didn’t investigate, despite the “no less than five different payroll firms,” all ‘seemingly defaulting on their payment obligations’.
Why was Opus penalised for a fraud that happened downstream?
The suspicious quintet was enough for HMRC to deny Opus the corresponding input tax credits, and impose penalties — both on Opus as a company and on Giller as its director, the law firm pointed out.
“To deny the input tax, HMRC had to establish that there had been a tax loss, resulting from fraudulent evasion in connection with related transactions.
“And that it, and its director, knew or should have known of the connection,” Egos legal consultant Roger Sinclair told Integro. “As the judge at the First-tier Tribunal (FTT) hearing delightfully put it:
‘It might be said that one or two fraudulent traders could be attributed to bad luck but five in a sequence or pattern of one after another in this manner and demonstrating a repeating pattern of failures is, in our view, entirely beyond the realm of what could be characterised as misfortune.’”
A legal adviser to the contractor industry since 1994, Mr Sinclair emphasised that according to the UT (which upheld the FTT’s ruling), any VAT fraud would have been “downstream” of Opus itself.
“Nevertheless, Opus Labour Services Ltd was the one facing the input tax denial, and both it and its director, the [HMRC] penalty,” Sinclair said.
Did blaming his accountant work as a defence for Giller?
For his defence, Mr Giller argued that his accountant neglected to inform him of any checks he should carry out to maintain the integrity of the supply chain that his company was in.
But in dismissing his appeal on June 18th 2026, Upper Tribunal judges Thomas Scott and Andrew Scott described Giller blaming his accountant as “no answer.”
Is ‘I didn’t know’ still a valid defence for company directors?
Kareena Prescott, a lawyer, says the ‘Jason Giller case’ is therefore a warning to VAT-registered company directors that “I didn’t know” is “no longer a defence.”
Published on July 20th 2026, the UT’s judgment’s “most striking and most commercially significant feature” is “what it says about a director’s state of mind,” Prescott added on LinkedIn.
“Mr Giller was found not to have known about the fraud. He was found not to have deliberately turned a blind eye to it. And yet he still lost, because the tribunal found he had failed to think about facts that were directly in front of him — and failed to consider their implications.”
What red flags did the tribunal say Giller missed?
Founder at C2E Law, Prescott pointed out in a PDF carousel of Giller v HMRC that he was told his “approach was one of simply not caring whether or not his counterparties were fraudsters.”
Prescott cited the tribunal’s finding that Giller paid “substantial sums” (often around £20,000 a week) to companies that Opus knew “next to nothing” about, as among the “red flags.”
What is ‘due diligence’ described as?
As for Giller blaming his accountant, Prescott pointed to the UT’s own words: due diligence isn’t a checklist exercise, but merely “commercial common sense” (see paragraph 217 of the decision).
If he had practiced ‘commercial common sense,’ Mr Giller would have found out that his company’s outsourced payroll arrangements were connected to VAT fraud, according to Professional Passport.
Of the UT’s July 20th ruling, Professional Passport’s Crawford Temple said: “[It] provides a stark reminder that businesses cannot ignore warning signs in their supply chains and illustrates how HMRC is prepared to apply the Kittel principle where it believes businesses should have identified fraudulent arrangements.”
Temple recommends directors understand their supply chains, question arrangements ‘that don’t stand up to commercial scrutiny’ and take “meaningful steps” to identify and address risk.
What four steps does Integro say company directors should take in wake of Giller v HMRC?
Directors should take four practical steps immediately, says Integro Accounting managing director Christian Hickmott — fresh from consulting his team, who’ve specialised in contractor tax since the firm launched in 2013.
“For directors, we’d say the practical lesson of ‘Giller’ is ‘due diligence’ and that’s taking four key steps,” Hickmott says:
- Retain evidence of your supplier due diligence
- Record proof of your supplier VAT registration and Companies House checks
- Obtain assurances that PAYE and VAT obligations are being met
- Maintain written records of risk assessments and compliance reviews.”
Why is the Jason Giller Upper Tribunal case significant?
Hickmott — himself a specialist in contractor taxation for even longer than his firm, at 16 years — says: “Giller v HMRC at the UT is significant because a finding of dishonesty was not required for him to lose.
“Instead, the company lost its entitlement to recover VAT under the Kittel principle and the associated personal liability notices were upheld, leaving Mr Giller exposed to penalties of more than £900,000.
“The strongest defence is, often, not proving that no fraud existed within the supply chain, but demonstrating that reasonable and documented steps were taken in response to identifiable risks.”
Giller v HMRC: the key points (continued)
A legal adviser to directors running personal service companies, recruitment agencies, and umbrella companies, Egos’s Mr Sinclair reflected — and offered a more fail-safe, practical takeaway.
“The primary question for the Upper Tribunal was whether or not Mr Giller knew or should have known [that Opus’s outsourced payroll arrangements were connected to VAT fraud] — and their decision was ‘yes.’
“The key point? Make sure you know your supply chain — at least sufficiently well to be able to remove from it anyone you discover may not themselves be acting compliantly, particularly in relation to VAT. You mess with the VAT-man at your peril.”
